RERA starts unravelling as key fixes in law are neglected

While there are detailed clauses on how the RERA can adjudicate and issue orders, it did not even provide the necessary tools to get the orders executed. (File image)

The Odisha Real Estate Regulation and Development Authority (RERA) has expressed its inability to adjudicate on consumer issues as it has no financial power or structure to execute the orders that it passes against the industry. It has now sent consumers to civil courts to seek justice. The case will come up for hearing on February 7, 2023, when the two-judge bench of Chief Justice S Muralidhar and Justice M S Raman will hear from the Odisha RERA and the state government.

This has brought the issue of lack of powers of execution out into the open and the Centre and states need to amend the RERA Act to fit in these crucial clauses. The issue was flagged at the Urban Development Conclave by the Indian Institute of Human Settlements in November 2022, when the issue was debated and the conclusion was that without the necessary powers to execute orders, RERA may well fade away into an insignificant law that does not have the necessary structure to enforce the solutions. The root issue is that while RERA was a consumer protection act exclusively for the real estate sector, the Act did not give it exclusive jurisdiction over the sector.

Hurdles to Execution

While there are detailed clauses on how the RERA can adjudicate and issue orders, it did not even provide the necessary tools to get the orders executed. As a result, once a consumer gets a favourable order from RERA, he has to go to the district magistrate or collector to get them executed. Once the orders go into the common civil pool, the speed of execution is severely impacted. This is why the Odisha RERA has laid down the gauntlet and said since its adjudication is restricted to issuing orders and not to taking it through to its logical conclusion, the case may as well go directly to the civil court. This was what experts at the IIHS conclave had flagged, that in the absence of executing orders, RERAs are soon going to throw up their hands and not take decisions at all.

This issue has been flagged by consumers and RERA regulators alike and has even been taken up with the Centre several times. The amendment to the Act needs to grant powers of execution of its orders to the state RERA authorities. It also needs to give RERA primary jurisdiction in the sector for it to become effective.

Parallel Proceedings

While the Act does allow RERA to rule on disputes, it did not preclude other forums from passing laws on real estate matters. As a result, the national and state consumer redressal forums and the National Company Law Tribunals too can adjudicate on these issues. While RERA’s primary mandate is to get the projects completed and handed over to the consumer who has paid for a unit, consumer forums give maximum penalties for non-delivery to the petitioners who filed the case. It does not ensure a class action and therefore does not give uniform relief to all buyers in the project. Also, with the limited resources available for incomplete and delayed projects, once individual buyers get compensated for delay, there is no way the project will be completed, in the larger good. Similarly, the NCLT is a recovery body and hardly any real estate projects have gone through to completion in the NCLT process.

In the Pioneer Urban case, giving his interpretation of the law, Justice Rohinton Nariman had said: “The fact that RERA is in addition to and not in derogation of the provisions of any other law for the time being in force, also makes it clear that the remedies under RERA to allottees were intended to be additional and not exclusive remedies.” Herein lies the problem. A case that is being handled by RERA, if challenged in the NCLT, will have to yield place to that court. As a result, RERA authorities have been struggling to establish themselves as the absolute arbitrator of the real estate industry. Justice Rohinton Nariman called this out: “That another parallel remedy is available is recognised by RERA itself in the proviso to Section 71(1), by which an allottee may continue with an application already filed before the Consumer Protection fora, he being given the choice to withdraw such complaint and file an application before the adjudicating officer under RERA read with Section 88.”

In such circumstances, the RERA laws cannot always hold against the consumer protection act or the Debt recovery tribunals. The fact that it has also not been given powers to execute its orders, makes its case weaker. In states where the Chairman and regulators are well in control and RERA has the strong backing of the political powers, such as in Uttar Pradesh, it has become a force to reckon with. But as an Act, it is often referred to as the toothless tiger, probably what the Odisha RERA has drawn attention to.

E Jayashree Kurup is Director, Real Estate & Cities, Wordmeister Editorial Services LLP. Views are personal and do not represent the stand of this publication.